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It has been about a month since the last earnings report for Principal Financial (PFG). Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Principal Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Principal Financial Q4 Earnings Beat, Revenues Miss
Principal Financial 's fourth-quarter 2020 operating net income of $1.48 per share beat the Zacks Consensus Estimate by 3.5% and grew 4.9% year over year.
However, Principal Financial witnessed lower revenues across most of its business lines, which were offset by lower expenses and higher assets under management (AUM).
For 2020, Principal Financial reported operating net income of $4.94 per share, which beat the Zacks Consensus Estimate by 1.2%. However, it decreased 11.5% year over year.
Total operating revenues of $14.7 billion beat the consensus mark by 1.4%. However, it decreased 9.1% year over year.
Behind the Headlines
Operating revenues decreased 12.2% year over year to nearly $3.6 billion. The downside was due to lower fees and other revenues and premiums and other considerations. The top line missed the Zacks Consensus Estimate by 4.7%.
Total expenses decreased 13.7% year over year to $3.2 billion due to lower operating expenses and benefits, claims and settlement expenses.
Principal Financial’s AUM as of Dec 31, 2020 was a record $806.6 billion, up 9.7% year over year.
Retirement and Income Solution: Revenues decreased 21.1% year over year to about $1.8 billion.
Pre-tax operating earnings increased 28.6% to $266.8 million on account of improved performance at Retirement and Income Solution-Spread business.
Principal Global Investors: Revenues of $412.6 million were down 5.7% from the prior-year quarter.
Operating earnings increased 5% year over year to $151.9 million primarily due to growth in management fees and disciplined expense management.
Principal International: Revenues decreased 9.8% year over year to $294.6 million in the quarter.
Operating earnings decreased 23% to $59.6 million due to lower combined net revenue.
U.S. Insurance Solution: Revenues grew 4.2% year over year to $1.1 billion.
Operating earnings of $89.5 million decreased 38.1% year over year due to poor performance at Individual Life Insurance and Specialty Benefits Insurance business.
Corporate: Operating loss of $81.6 million was narrower than $95.7 million loss incurred a year ago. This narrower loss was due to expense management actions.
As of Dec 31, 2020, cash and cash equivalents were $2.8 billion, up 13.3% year over year.
At fourth-quarter end, debt was $4.3 billion, up 14.6%.
As of Dec 31, 2020, book value per share (excluding AOCI other than foreign currency translation adjustment) was $47.07, up 6.4% year over year.
Principal Financial paid out $153.7 million in dividends and bought back shares worth $75million in the fourth quarter.
The board of directors approved fourth-quarter dividend of 56 cents per share, up 2% year over year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Principal Financial has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Principal Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Principal Financial Group, Inc. (PFG) : Free Stock Analysis Report
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